Given the size of Italys economy and the scale of its public debt—at 133% of gross domestic product—its lack of growth remains the single biggest threat to the stability of the euro zone. Yet to the concern of many policy makers and investors, Prime Minister Matteo Renzi appears to be spending the most political capital seeking changes to euro-zone fiscal rules to allow Italy to borrow more, rather than pushing through reforms that might boost Italys growth prospects. When Mr. Renzi took office in February, he announced an ambitious 100-day program to change Italy. Having failed so far to deliver on any of his goals, he has now given himself a new deadline of 1,000 days. Yet the only substantial reform that now looks likely to be achieved this year is an overhaul of the electoral rules and the Senate—reforms of totemic significance to the Italian political class but of zero economic consequence. Far-reaching reforms of the public administration, judicial system, government spending and labor market have been promised but details remain scarce and timing unclear. Until Mr. Renzi proves he can live up to his own domestic reforming rhetoric, investors should brace themselves for more wobbly weeks like the last one.
Posted on: Mon, 14 Jul 2014 09:51:17 +0000
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